Major Conglomerates' Q2 Earnings To Watch On Jul 22: GE, HON

The Q2 earnings season is gradually picking up steam with 92 companies on the S&P 500 index reporting this week. Although it is too early to predict any clear pattern, the 36 companies that have reported results till Friday (Jul 15), more or less confirm the grim earnings projections for the quarter. Based on the hitherto declared results, Q2 is widely expected to be the fifth consecutive quarter to report an earnings decline for the benchmark index.

Plagued by a plethora of macroeconomic issues and continued volatility in the equity market, Q2 earnings estimates for the S&P 500 index have hovered in the negative territory, improving slightly from the last quarter. Per the latest Earnings Trend Report, overall Q2 earnings for the S&P 500 companies are expected to be down 5.9% on a 0.5% decline in revenues. The relative improvement in negative estimate revisions for the quarter is largely due to a turnaround in oil prices and fading effects of the dollar strength. The S&P 500 has also witnessed a dramatic reversal in its fortunes when it shrugged off about 5.3% drop in just two trading sessions (on the Brexit referendum) to record over 2% return for the quarter.

However, the overall Q2 earnings scenario still remains clouded with uncertainty. What is more alarming is that the likely dismal earnings performance is not attributable to the inherent weakness of the Energy sector alone. Rather, downward estimate revisions are expected in almost all the sectors, barring a few. About 9 of the 16 sectors are expected to witness an earnings decline in the quarter under review, with Oil/Energy, Basic Materials, Transportation, Industrial Products, and Technology being the most notable.

Among the Conglomerates slated to report this week, let’s have a sneak peek at two major industrial goods stocks to see how things are shaping up for the upcoming quarterly results.

General Electric Company (NYSE:GE) is scheduled to report second-quarter 2016 earnings before the opening bell tomorrow. During the quarter, General Electric had initiated steps to supplement its digital presence in Europe and foster growth of the industrial ecosystem for the continent’s overall development. The company opened a new digital office in Paris titled Digital Foundry, which is likely to be the hotbed for the industrial ecosystem. The Digital Foundry forms a global network of centers through which GE Digital intends to incubate local startups, form client collaborations to develop new applications and extend the burgeoning community of industrial developers in Europe. This industry-pioneering program will likely help General Electric to gain a competitive edge over peers, grow its customer base and generate higher revenues by expanding its IT portfolio. For the impending quarter, this Zacks Rank #3 (Hold) stock has an Earnings ESP of +2.17%, making an earnings beat likely. (Read more: Can GE Beat Q2 Earnings on Digital & Industrial Focus?)

Honeywell International Inc. (NYSE:HON) will report second-quarter 2016 results before the opening bell tomorrow as well. During the quarter, Honeywell unveiled plans to spin off its $1.3 billion resins and chemicals business into a standalone, publicly traded company called AdvanSix. This move came two months after it backed out of a $90 billion blockbuster bid to buy rival giant United Technologies Corp. (NYSE:UTX) after facing resistance from the target, antitrust regulators and key clients. Post spin-off, the new company will be a leading producer of Nylon 6, a polymer resin used to produce engineered plastics, filaments, fibers and films that are used in products such as automotive and electronic components, and also in food and industrial packaging. During the second quarter, Honeywell also announced its plan to invest $100 million to expand its Asia-Pacific regional headquarters and R&D facilities in Shanghai by purchasing a new headquarter building in the city. Honeywell is likely to post healthy second-quarter results on the back of these strategic moves. For the impending quarter, this Zacks Rank #2 (Buy) stock has an Earnings ESP of 0.00%. (Read more: Will Honeywell Pull a Surprise this Earnings Season?)

Stay tuned! Check later on our full write-up on earnings releases of these stocks.